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Exploring the reality and the hype of Arctic boundary disputes, land grabs, resource races, and the transformation of global shipping

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In the summer of 2012 sea ice extent in the Arctic Ocean fell to the lowest level on record: 3.41 million sq km (1.32 million sq mi) – fully 50% lower than the 1979-2000 average of 6.74 million km2. This record low level of Arctic sea ice extent is consistent with observations over the past five northern summers, and is compounded by a severe decline in sea ice thickness. The Arctic region is clearly undergoing rapid environmental and socio-economic change and as conditions warm, the retreat of sea ice is driving an expansion of political and economic activity. As a consequence of these developments, recent world media attention has been focused on the Arctic to an unprecedented extent. Much of the contemporary narrative tends to characterise the region as an arena for resource-driven jurisdictional and geopolitical rivalries. Recent coverage of the Arctic has focused on a perceived ‘scramble’ or ‘gold rush’ for jurisdictional rights linked to access to marine resources, especially potential seabed energy resources, as well as the possibility of opening long-sought navigational routes through the Arctic Ocean.

An Arena for Conflict?

Suggestions that the Arctic is the focus of a multi-player ‘land grab’ and ‘scramble’ or ‘race’ for resource access have been widespread since reports of the substantial melting of Arctic summer sea ice cover emerged and particularly in the wake of Russia’s planting of a flag on the sea floor beneath the North Pole in 2007. Such imagery of a contested region has been sustained over time and is by no means merely confined to media analysis. For example, in October 2010 US Navy Admiral James G Stavridis, NATO's Supreme Allied Commander Europe (SACEUR), warned that a warming Arctic and a race for resources could lead to a new “cold war” in the Arctic. Stavridis observed that: “For now, the disputes in the north have been dealt with peacefully, but climate change could alter the equilibrium over the coming years in the race of temptation for exploitation of more readily accessible natural resources,” and cited the melting of the Arctic ice cap as “a global concern” because of its potential to “alter the geopolitical balance in the Arctic heretofore frozen in time.”[1]

If there is an ongoing landgrab in the Arctic it is an odd one given that the solitary territorial dispute in the region is that between Canada and Denmark over tiny Hans Island, located in the Nares Strait between Ellesmere Island and Greenland, and which has an area of just over a single square kilometre (1km2). It is worth noting that the dispute over sovereignty of the island did not prevent these generally friendly neighbours from settling as early as 1973 their continental shelf boundary in the area, which conveniently stops just to the south of the disputed island and then proceeds from a point just to the north of it.

What then of conflicting maritime claims? In fact all of the Arctic coastal States, save for the United States, are parties to the United Nations Convention on the Law of the Sea (LOSC).[2] Moreover, it is notable that the US generally considers LOSC, and particularly those parts of it relating to maritime jurisdiction, as being reflective of customary international law and pursues its oceans policy accordingly. Consequently, all of the Arctic littoral states, including the US, have advanced maritime jurisdictional claims consistent with the LOSC, notably 12 nautical mile (nm) breadth territorial seas and 200nm Exclusive Economic Zones (EEZ). Similarly, in accordance with the provisions of Article 76 of LOSC, the Arctic littoral states that are parties to LOSC have made, or are in the process of preparing, submissions to the relevant United Nations scientific body (the Commission on the Limits of the Continental Shelf). These are related to the outer limits of the continental shelf seaward of the 200nm limits of claimed EEZs.

It is true that the Arctic is host to overlapping maritime claims, for instance between Canada and the United States in the Beaufort Sea, and further overlaps in the central Arctic Ocean can be anticipated as extended continental shelf submissions are made. But this is hardly out of keeping with maritime claims made elsewhere in the world ocean. Further, a number of overlapping maritime claims and disputes in the Arctic have been amicably resolved, notably the longstanding dispute between Norway and Russia in the Barents Sea which was resolved through the delimitation of a maritime boundary in 2010, dividing an overlapping area of approximately 175,000km2.

While increased competition between Arctic States (and non-littoral Arctic user States) is probable as activities become more feasible in high latitudes, this hardly suggests that conflict is inevitable as some of the more doom-laden predictions on the future of the Arctic suggest.

A ‘Resource Race’?

There have also been suggestions that the Arctic offers great potential in terms of seabed energy resources and even represents the ‘last great frontier’ for oil and gas exploration. This notion has created much excitement, especially in the media, and tends to underpin the idea of a ‘race for resources’ in the Arctic, especially when conflated with jurisdictional developments.

Suggestions that there is an ongoing Arctic resource race are often framed in terms of access to suspected yet undiscovered Arctic oil and gas resources. Indeed, it has been suggested that the Arctic offers great potential in terms of seabed energy resources. The United States Geological Survey’s (USGS) 2008 Circum-Arctic Resource Appraisal pointed to the existence of over 7 million km2 of Arctic continental shelf areas under less than 500 meters of water. It also posited that these shallow continental shelf areas “may constitute the geographically largest unexplored prospective area for petroleum remaining on Earth.” The USGS report went on to conclude that, overall, the Arctic may hold around 22% of undiscovered, technically recoverable resources globally, potentially consisting of 90 billion barrels of oil (13% of global undiscovered oil); 1,669 trillion cubic feet of natural gas (30% of undiscovered gas); and 44 billion barrels of natural gas liquids (20% of undiscovered liquids). These are undoubtedly highly impressive and enticing figures. Critically, however, as a result of the difficulties of gathering data in the Arctic’s harsh conditions, the USGS findings were based on a “probabilistic” analytical methodology and are therefore inherently uncertain.[3]

Another sticking point is that the USGS assessment deals in oil and gas resources rather than recoverable reserves. This distinction is vital. Even if an optimistic estimated recovery rate of 35% of oil reserves translated to proven reserves, the USGS’s figure of 90 billion barrels of oil rapidly scales down to potential reserves of 31.5 billion barrels. When it is considered that global consumption of conventional oil (i.e. crude oil and condensates) totaled approximately 26.9 billion barrels in 2010 alone according to the U.S. Energy Information Administration, the potential significance of Arctic oil in global context is thrown into stark relief.

Even if the Arctic seabed does contain globally significant hydrocarbon resource potential, enormous challenges to exploring for, exploiting, and transporting these resources remain. Despite summer warming and melting, ice cover and extreme low temperatures will remain the norm in the Arctic for much of the year. It has also been suggested that the Arctic is likely to be predominantly gas-prone. This necessarily has implications for the development of such resources, for two reasons: there are significant challenges associated with gas pipelines in extremely cold conditions, and the recent collapse in the price of natural gas in North America as shale gas has increasingly become available. Consequently, the exploitation of a large portion of Arctic seabed resources appears unlikely in the near-term.

The Arctic, and particularly sub-Arctic areas, may yet witness increasing oil and gas exploration activity and development, as demonstrated in the Barents Sea. Such activity may also be of significance on a regional or national basis. Equally, however, the Arctic may not yield the kind of oily bonanza that is sometimes suggested, and may not represent a magical ‘silver bullet’ to regional and global energy security concerns. Nonetheless, there exists a strong perception that the Arctic may yield seabed energy resource riches, and this perception helps underpin claims to maritime jurisdiction. For example, in one of the final acts of his presidency, outgoing U.S. President George W. Bush, issued a National Security Directive stating “[e]nergy development in the Arctic region will play an important role in meeting growing global energy demand” because of the “substantial portion” of global undiscovered energy resources thought to exist there.

Shipping Lanes Transformed?

Conventional wisdom suggests that as the Arctic warms, so sea ice coverage will be reduced and thus the seasonal Arctic navigational ‘window’ will expand. Indeed, a key finding of the 2004 Arctic Climate Impact Assessment (ACIA) report was that “[r]educed sea ice is likely to increase maritime transport and access to resources.”[4] This scenario has stirred long-standing– and long-dormant – dreams of the opening of shipping routes between the Atlantic and the Pacific Oceans by way of the Arctic, namely the Northwest Passage and the Northern Sea Route (formerly known as the Northeast Passage).

It is not difficult to understand the allure of these routes. The Northwest Passage offers a staggering 9,000 km (4,860 nautical miles (nm)) distance saving over the traditional route between Europe and Asia via the Panama Canal and a 17,000 km (9,180nm) saving as compared with the Cape Horn route. Similarly, use of the Northern Sea Route rather than the traditional route via the Suez Canal cuts the distance of a voyage between Hamburg, Germany to Yokohama, Japan, from around 11,400nm down to around 7,200nm.

It should be noted in this context that the calculation of distance savings is complicated by the fact that both the Northwest Passage and Northern Sea Route do not consist of a single passage but are rather a series of routes. For the Northwest Passage, for instance, they consist of different straits between the islands of the Canadian Arctic archipelago. They are to be found at different latitudes for the Northern Sea Route. The choice of precise routing often depends on ice conditions at the time of passage. For the Northern Sea Route, the longer, higher-latitude and therefore considerably more ice-prone route is actually preferable to the lower-latitude, near-shore coastal route, which involves traversing a series of shallow straits, particularly in the Laptev and Kara Seas. Such conditions in turn dictate serious draft, beam and therefore size restrictions on transiting vessels.

The passage of multiple high-tonnage vessels including super-tankers, liquefied natural gas (LNG) tankers and large ore carriers, especially via the Northern Sea Route in recent years, has tended to encourage speculation that Arctic sea routes offer the potential to transform global shipping routes. This would clearly be significant for the global economy, given that an estimated 90% of global trade by volume is carried by sea.

There are, however, a number of factors that suggest such a radical transformation in international trade routes is not on the immediate horizon. The first and most obvious factor that mitigates against the use of the Northwest Passage for regular inter-oceanic transits is that, while the waterway (or rather, waterways) in question may be ice-free at the end of the Arctic summer, the Arctic navigational ‘window’ is still relatively narrow. In recent years the Arctic sailing season has been of the order of 6-8 weeks. There are indications, though, that this navigational window is widening. For example, in 2011, the Northern Sea Route opened from early July to mid-November. However, ice and weather conditions can still be adverse in this period such that, even in a relatively ice-free summer, wind-blown ice may impede and delay navigation. Uncertainties and potential delays regarding passages through Arctic sea lanes lead to highly variable transit times and unreliable shipment scheduling. This represents a major disincentive to the use of these sea lanes particularly for container traffic which tends to rely on just-in-time delivery of cargo. The lack of developed infrastructure in Arctic coastal hinterlands also limits the necessary support available to transiting container vessels, though there has been movement recently to redress such shortfalls. Overall, for much of the year ice is likely to remain a key factor and a major threat to safety of navigation for decades to come, limiting the attraction of Arctic sea lanes.

Further likely challenges relate to the absence or poor quality of port facilities and other support infrastructure along Arctic routes including search and rescue capacity. Limitations exist in terms of adequate charting of Arctic routes and availability of sufficient satellite coverage for accurate positioning and navigation. Similarly, the provision of meteorological information, especially on ice conditions and the distribution of wind-blown ice likely to impact navigation, remains problematic.

There are also considerable additional costs to operating in high latitudes. Russian authorities charge ‘ice breaker fees’ for passage through the Northern Sea Route. There are indirect costs associated with delayed passage. Bureaucratic passage procedures and controls (as compared to the relatively straightforward and proven procedures for passage through the Suez and Panama Canals) are poorly developed, increasing the likelihood of delays and higher costs. Manning and operating ice-strengthened vessels also implies additional costs. Significantly, insurance premiums for high north operations are likely to be higher. In short, distance savings do not tell the whole story. The financial costs of navigating Arctic waters tend to offset the admittedly substantial savings made in terms of swifter passages and reduced bunkering costs. Such dramatic distance savings are also significantly eroded in cases of more southerly destinations such as Hong Kong or Singapore.

Nonetheless, navigation traffic in the Arctic is clearly on the rise, led by increased yachting and ‘adventure cruising’ in Arctic waters, increased support traffic for oil and gas developments on the periphery of the Arctic, and to some extent from the pursuit by fishing fleets of fish stocks migrating as a consequence of warming oceans. Additionally, there does appear to be growing scope for the use of Arctic routes for certain types of cargo, including shipments of non-perishable raw materials such as oil, gas and ore which tend to be point-to-point rather than following a schedule of port calls.

Such obstacles to Arctic navigation will likely be redressed through technological advances and infrastructure investments including port and infrastructure upgrades, improved positioning technologies and charting, enhanced search and rescue capabilities and improved access to up-to-date meteorological information. For the Northern Sea Route, the use of ice-strengthened vessels coupled with an increasingly ice-free route may reduce the need for ice-breaker assistance, thereby reducing costs. Similarly, procedures for securing route permissions may be developed and streamlined as it becomes a more popular option for shipping.

These improvements may lengthen the Arctic summer sailing window. Indeed, the push towards lengthening the Arctic sailing season is exemplified by the first successful winter passage through the Northern Sea in November 2012, when the Ob River, a large Russian tanker, carried a cargo of 134,000 cubic metres of liquefied natural gas (LNG) from Hammerfest in northern Norway to Tobata in southwestern Japan. The voyage slashed 20 days off the traditional route and saved of the order of 40% in fuel consumption.

Arctic navigation, while relatively limited at present, will likely continue to increase. This will be highlighted as Arctic States such as Russia try to enhance development in high latitude areas and improve access to resource development in parts of northern Siberia. North and East Asian States, particularly China, will seek alternative navigational routes, as well as diversified sources of supply of raw materials and energy, in part to reduce dependence on more traditional, vulnerable routes such as the Malacca Straits. Even a trans-polar 'over the top' route has been mooted but has yet to be realised.

A Changing Arctic

For all the myths and misconceptions concerning the Arctic, it is abundantly clear that its perceived role and importance is changing in response to global climatic and economic drivers. Substantial changes in the sea ice, atmosphere and hydrological regime are generating changes in biodiversity patterns and distributions. These are opening up the Arctic for development, a trend reinforced by resource scarcity elsewhere and the desire to seek alternative navigational routes. These developments necessarily inform the maritime jurisdictional claims of the Arctic coastal states. Overall, while there appears to be a considerable helping of hype to some claims made about Arctic opportunities (and their potential impact on global trade), there is little doubt that Arctic development will continue.

[2] Though readers may be more familiar with references to ‘UNCLOS’, there is no universally accepted abbreviation for the Convention. I use ‘LOSC’ here to distinguish it from the three UN Conferences on the Law of the Sea (UNCLOS I, II and III).

About the author: Clive Schofield is Professor and Director of Research, Australian National Centre for Ocean Resources and Security (ANCORS), University of Wollongong, Wollongong, NSW 2522, Australia. E-mail: clives@uow.edu.au. Professor Schofieldis the recipient of an Australian Research Council Future Fellowship (FT100100990).

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